Beer Industry Fair Dealing Act – Aftermath in Stawski v. Browery Zywiec

In last week’s Beer Industry Fair Dealing Act post we brought you the arbitration clause decision from the 7th Circuit in Stawski Distributing v. Browery Zywiec where the 7th Circuit found that an older version of Illinois’ BIFDA failed to trump federal and international law regarding the rights of parties to contract to arbitrate in a foreign forum – Poland in this case.

We told you there was some interesting aftermath in the case and we don’t want to disappoint.  So in today’s Illinois Beer Industry Fair Dealing Act Thursday post… here’s the rest of the story.

After the 7th Circuit’s decision the parties arbitrated their claims in Poland under Illinois law.

“The arbitration hearing was held in the Arbitration Court of the Polish Chamber of Foreign Trade in Warsaw, Poland on June 23, 2004. The arbitration panel consisted of three arbitrators, including Professor Krsysztof Staniszewski, who was selected by Stawski, and Professor Jozef Okolski, the President of the Arbitration Court. Prior to the hearing, the parties submitted relevant documents to the arbitrators, including Zywiec’s claim, Stawski’s counterclaim, and the IBIFDA. At the hearing, both parties were represented by counsel. Stawski was represented by Polish and U.S. counsel. Zywiec was represented by Polish counsel. The arbitration panel allowed oral arguments from both parties. The parties requested that the arbitrators apply the IBIFDA with regard to the Illinois-related dispute. Stawski presented its financial officer, Robert Kociecki, as its witness. Counsel for both parties examined and cross-examined Mr. Kociecki. The arbitrators also examined Mr. Kociecki. No other witnesses were presented. At the invitation of the arbitrators, both parties submitted post-hearing briefs. Neither party requested that the arbitrators allow additional evidence or argument in their post-hearing submissions. On July 15, 2004, the arbitrators issued the arbitration award entered in the Court of Arbitration at the Polish Chamber of Commerce, Case No. S. A. 57/03 and SA 90/W/2004 (“the arbitration award”). In the arbitration award, the arbitrators found that Zywiec’s July 2002 termination letter was ineffective under Polish law but that the October 2003 letter [A second letter that Zywiec had sent detailing the reasons for termination] was effective in terminating the Agreement under Polish law and the IBIFDA. The arbitrators also rejected Stawski’s damage claim because Zywiec had delivered beer to Stawski during the notice period.

NOTE:  We looked for a copy of the second letter from October 2003, but couldn’t locate it in the Court’s electronic file.  A brief filed by Stawski does list the seven reasons stated in the letter and the brief can be found here.

After the arbitration, Zywiec petitioned the federal court in Illinois to confirm and enter judgment of the Polish arbitration panel.  Stawski opposed the confirmation stating that the Polish panel had improperly applied Polish law instead of Illinois law.  The Court confirmed the award in favor of Zywiec and found that:

“[T]he arbitration award shows that the arbitrators understood their obligation to apply the IBIFDA to the parties’ dispute and that they carried out that obligation. First, the arbitrators recognized that whether the termination of the Agreement “entered into by the Parties on July 7th, 1997, by written notice dated October 1st, 2003 given to Stawski Distributing Co., Inc. is in conformity with the Illinois Beer Industry Fair Dealing Act” was at issue. The arbitration panel ultimately concluded that the October 1 notice was “in conformity with the Illinois Beer Industry Fair Dealing Act…” Second, the arbitration award noted that the parties requested that the arbitrators apply the IBIFDA in the arbitration proceeding in order to be in conformity with this court’s order, which the arbitrators agreed to do.

Third, the arbitrators applied the IBIFDA requirements to the October 2003 termination notice. In order to decide whether the October 2003 termination notice was effective, the arbitrators explained that they needed to resolve (1) whether the termination notice was correct from the formal point of view, (2) whether the termination was in conformity with the IBIFDA regulations, and (3) whether the termination was in conformity with the agreement. The arbitrators reached the following conclusions:

Ref. 1 The notice dated October 1st, 2003 was signed by two authorized persons in accordance with the Company Articles of Association. 5

Ref. 2 The provisions of § 3.2 of the BIFDA regulations provide that notice of termination shall be made in writing and sent to the Party concerned by registered mail at least 90 days before the date the Agreement is terminated, complete with the full statement of reasons for such termination and all relevant documents.

The notice of termination dated October 1st, 2003 met these conditions.

Stawski appealed and the 7th Circuit upheld the trial court’s ruling in favor of Zywiec.

The case’s aftermath is a great lesson in some distilled principles under BIFDA for termination – namely, a writing, 90 days out, that details the reasons for termination and offers the chance to cure.